Agreements between entities, such as persons and businesses, underpin a wide variety of transactions, particularly in commercial settings. Agreements that create legally enforceable obligations are known as contracts. A smart contract is a machine that facilitates implementation of at least a portion of an act associated with an agreement between entities. For example, a vending machine can be a realization of a smart contract between a purchaser and an owner of the merchandise inside the vending machine. A smart contract can also be realized using computer hardware, software, or a combination of both. Because portions of acts associated with agreements between entities can be automated by computerized systems, advocates of smart contracts believe that the transactional costs of smart contracts may be less than the transactional costs of traditional contracts.
Another example of a smart contract is a starter interrupt device, which allows a lender at a remote location to disable an automobile whose owner is late making a payment on a loan. More generally, aspects of smart contracts can be found in computer-implemented systems and software that provide quality of service mechanisms associated with service level agreements for packet switched computer networks, automated digital rights management for copyright licenses, cryptographic systems such as those that are often used for financial transactions, and automated enforcement mechanisms in peer-to-peer file sharing networks.